How to Comply with Philadelphia’s New Airbnb Limited Lodging Laws
The boom in short-term rentals, launched by Airbnb more than 10 years ago, disrupted the vacation rental and hotel industry around the world. However, in cities like Philadelphia, this disruption has led residents to fear that short-term rentals will drive up local rents, limiting the availability of long-term residential rentals, attracting an influx of tourists and creating excessive noise.
Starting January 1, in an effort to strike a balance between tourism and community, the city imposed regulations on short-term rentals.
Before the regulations, these rentals operated mostly unattended in the city, where City Hall was unable to collect taxes or verify security codes. Properties could even be set up on these rental sites without the knowledge of the owner – as was the case with a resident of South Philly the previous Christmaswho returned home to find that someone had listed the family home for a tenant.
The city regulates the industry so short-term rental operators need two licenses and a zoning permit to operate legally in the city (which will cost them a few hundred dollars). Online platforms will also require these rental operators to confirm that their rental is licensed. Additionally, all operators must pay the city’s hotel room rental tax, but in most cases booking agents and online platforms will incorporate the tax into their fees and pay the hotel tax on behalf of of the operator.
Although these regulations are part of a new bill introduced by the city council in 2021, many of these rules have been in place since 2015 – they were rarely enforced until now.
If you’re an established Airbnb operator or thinking about getting into the short-term rental game, here’s what you need to know to keep your business fresh. (Keep in mind that this whole process can take a few weeks.)
What are the rules for short-term rentals in Philadelphia?
In Philadelphia, you are legally allowed to rent your property, or a room, for 30 days or less – the city defines this as a short term rental. These are the types of rentals you see on apps like Airbnb, Vrboor Booking.com. However, to do this you need licenses, permits and a municipal business tax account to make your short term rental an honest business.
There are two categories of short term rentals and each has its own licenses and permits.
Rentals where the host lives in the property
Rentals where the host does not live in the property
No matter what category a host falls into, they will need a Philadelphia Income tax and business receipts (BIRT) and an account Commercial activity license. Both are free and are the first requirements for any individual or company to operate a business in Philadelphia. With a BIRT account, you must pay 5.99% to the city on net taxable income.
Following these steps is similar to registering your business with the city, but you still need to obtain more specific licenses and permits to start operating.
How to open a municipal business tax account: Guests can open a tax account at tax-services.phila.gov. You can also download and complete a paper form with shipping instructions. You will need your tax account number when applying for a business activity license.
How to get a business activity license: Hosts can request this license at eclipse.phila.gov. If you need help applying for the license, schedule a virtual appointment. You can also make an appointment to apply in person at the Permit and License Center at 1401 John F. Kennedy Blvd. weekdays from 8 a.m. to 3:30 p.m., by dialing 311 or online appointment booking. This license is renewed each year.
Rentals where the host lives in the property (limited accommodation)
If a host lives in the property they rent for 30 days or less, the city considers it a limited housing rental.
After obtaining a BIRT account and business license, limited accommodation rentals are required to obtain:
Lodging Limited Use Zoning Permit
Costs: $25 for single and two-family dwellings or $100 for all other buildings to apply, $174 to issue the permit.
Hosts can request a zoning permit online at eclipse.phila.gov or in person at the Permit and License Center at 1401 John F. Kennedy Blvd. weekdays from 8 a.m. to 3:30 p.m., by dialing 311 or online appointment booking.
Limited hosting license
Costs: $20 to apply, $150 for license (but $20 application fee is applied to license fee).
Hosts can request a Limited hosting license online at eclipse.phila.gov or in person at the Permit and License Center at 1401 John F. Kennedy Blvd. weekdays from 8 a.m. to 3:30 p.m., by dialing 311 or online appointment booking. This license is renewed each year.
A host can only apply for a limited hosting license up to after they get an approved zoning permit for limited lodging use.
Rentals where the host does not live in the property (Rental)
If a host or booking agent does not live in the property they are renting for 30 days or less, the city considers it a rental property.
After obtaining a BIRT account and business license, these short-term rentals are required to obtain:
Zoning permit for visitor accommodation
Costs: $25 for single and two-family dwellings or $100 for all other buildings to apply, $174 to issue the permit
Hosts can request a zoning permit online at eclipse.phila.gov or in person at the Permit and License Center at 1401 John F. Kennedy Blvd. weekdays from 8 a.m. to 3:30 p.m., by dialing 311 or online appointment booking
A host can only apply for a rental license until after they obtain an approved zoning permit for the use of visitor accommodation.
What impact will this have on short-term rental operators?
To begin with, short-term rental operators must cease operations until they obtain the necessary licenses and permits, or they will violate regulations.
The city will enforce these rules by working with booking agents and online platforms like Airbnb that list short-term rentals, to periodically communicate and verify whether rentals listed on their sites are operating legally. Basically, if you still advertise or list a short-term rental without a proper license or permits, you may be reported to the city by a booking agent or online platform.
If you are caught violating the rules, L&I will issue a Site Infringement Notice (SVN) to the owner, which can lead to heavy fines.
Another sore point for short-term rental operators is that to obtain this documentation, the rental property must be up to code, which can cost money depending on the condition of the property.
Before you can obtain licenses and permits for a property:
The property must be lead-free or unleaded and the owner must submit a lead certification and inspection report to the city at leadcertification.phila.gov.
Smoke alarms should be installed in every bedroom, hallways near bedrooms, and on every level of the home, including basements.
Carbon monoxide alarms should be installed within 15 feet of each bedroom in a central location on a wall or ceiling, but away from bathrooms and cooking appliances.
If a zoning permit is refused: The application for a zoning permit is not unique – it can be refused. Hosts must then appeal the decision within 30 days, which can cost up to $300. Hosts must also present their appeal at a public Zoning Board of Adjustment hearing. More information on zoning decisions on appeal can be found online.
Hotel tax: All short-term rental operators must now also pay the city’s hotel room tax, which is 8.5% of the total amount paid by the customer. These taxes must be paid on the 15th of each month using your BIRT account. However, in most cases, online platforms will incorporate the tax into their fees and pay the hotel tax on behalf of the operator, according to a city spokesperson.
Insurance: Getting a property insured for short-term rental is not required by the city to operate legally, but insurance is a good safety net in the event of an accident. Regular home insurance probably won’t cover short-term rentalstherefore, you may need additional coverage or a new type of coverage. Airbnb also offers host insurance through them..
Guest Rules: People renting the property are only allowed to have guests between 8 am and midnight. Also, only three people (including the owner and tenants) can occupy the property at a time, unless they are related.